This article presents general guidelines for Georgia nonprofit organizations as of the date written and should not be construed as legal advice. Always consult an attorney to address your particular situation.

Remember that tote bag you got when you made a donation to public radio? Did you know that the IRS cares about the value of that bag? According to the IRS, if something of value is given to a donor in exchange for the donation (a “quid pro quo”), then the donor can only take a tax deduction for the amount of the donation less the value of the item given. But the IRS makes an exception to this requirement if the item is considered a “low cost article”. If the donor only receives a low-cost article (like a tote bag) in exchange for a donation, then the donor can deduct the full value of the donation. What is a “low-cost article” depends upon the amount of the donation and the cost of the article itself. The IRS adjusts these amounts each year for inflation.

In 2020, if a donor makes a donation of $56 or more and only receives in return a token item with the donee’s logo that costs not more than $11.20 (such as a mug or a pen), then the item is considered a low-cost article and the donor can deduct the full value of his or her donation.

Further, in 2020, if the donor receives something in return for a donation and the cost of that item is not more than 2% of the donation or $112 (whichever is less), then the donor can deduct the full value of his or her donation.

If your nonprofit is providing donors with an item in return for a donation, you will need to determine whether such item qualifies as a low-cost article. If the item qualifies, then it’s a good idea to include the following in your fundraising materials: “Under IRS guidelines, the estimated value of the benefits received is not substantial; therefore, the full amount of your payment may be a deductible contribution.”

If the item does not qualify as a low-cost item then you will need to treat it as a quid pro quo donation and include the additional language in your acknowledgment. See our article, Guide to Sending Acknowledgements for Donations, for guidance on acknowledging quid pro quo donations. In addition, if the item given in return for a donation does not qualify as a low-cost item then the transaction may be considered to be a purchase rather than a donation. For example, if someone pays $20 and receives a t-shirt in return, it looks like the person bought a shirt rather than made a donation. If a nonprofit regularly engages in such transactions, then it may have to pay unrelated business tax on the income from such purchases. For more information, see UBIT: Four Letters Your Nonprofit Needs to Know.

U.S. nonprofits that have bank accounts in foreign countries must file a Report of Foreign Bank and Financial Accounts (FBAR) each year to report the existence of foreign financial accounts held outside the United States. Beginning this year, the filing deadline for the FBAR has been moved up to April 15 with a new automatic six-month extension option until October 15, 2017. This change aligns it with the filing deadline for individual income tax returns.

This is part seven of an eight part webinar series that provides general legal information about operating a 501(c)(3) tax-exempt, nonprofit corporation. This webinar details the financial responsibilities of the Board of Directors, including approving budgets, reviewing financial statements, and setting internal controls.

Presenter: Denise Devenny, CPA, Vice President of Operations with the Bipartisan Policy Center

Since Enron, the board of directors has been required to take on a greater role in overseeing the financial affairs of a nonprofit organization. All of your board members should read this!

Please note that in addition to the legal disclaimer above, this article contains information that is based, in whole or in part, on the laws of the District of Columbia. As a result, the information may not be appropriate for organizations operating outside the District of Columbia.

The IRS prohibits every 501(c)(3) nonprofit from paying its officers, directors and other insiders too much for any goods or services they provide to the organization. Nonprofits that do not follow these rules, and any officer or director who approved an excess payment, may be subject to taxes, fines and other penalties. This article will help your nonprofit determine whether a payment is within acceptable practices or whether it would result in an excess payment.

Please note that in addition to the legal disclaimer above, this article contains information that is based, in whole or in part, on the laws of the District of Columbia. As a result, the information may not be appropriate for organizations operating outside the District of Columbia.

As our Financial Policies 101 webcast demonstrated, nonprofits need to have good financial policies and procedures in place in order to satisfy funders, comply with IRS requirements, and avoid misuse of funds or even embezzlement.

During this one hour webcast, our presenters discuss best practices for: